Union Bank® Small Business Economic Survey: Most West Coast Small
Business Owners are Optimistic that the National Economy is Headed in
the ‘Right Direction’; an 11-Point Jump from Previous Survey

Post-election survey finds small business sentiment mixed about the
business climate in the next two years.

20% view federal government’s efforts to stimulate small business
as good or very good compared to nearly 40% that view more government
programs as a way to grow.

Nearly one-half of small businesses plan to keep prices the same.

Those looking to hire are looking for full-time staff.

In California, nearly 25% of owners are concerned about minimum
wage increases.

February 15, 2017 11:30 AM Eastern Daylight Time

LOS ANGELES--(EON: Enhanced Online News)--Small business owners are significantly more confident about the
national economy compared to January 2016, according to results from the Union
Bank annual Small Business Economic Survey released today. The 18th
annual survey also found that hiring is on the rise, with more business
owners planning to offer permanent full-time positions in 2017 while
interest in contractors and temporary positions wanes.

“The survey results indicate there is increased access to credit within
the banking industry, with more small business owners receiving loans or
credit to help finance day-to-day operations and growth”

Union Bank conducted the survey from Dec. 12, 2016 to Jan. 3, 2017,
compiling results from nearly 700 small business owners in California,
Oregon, and Washington State. The previous Small Business Economic
Survey was conducted in January 2016.

Overall, 53 percent of respondents said the national economy is headed
in the right direction, a significant reversal from January 2016 when a
majority (58%) believed the economy was headed in the wrong direction.
More than half of respondents (57%) also believe the economic outlook at
the state and local levels has improved versus 49 percent in January
2016. However, 62 percent of survey participants said the United States,
as an entity, is headed in the wrong direction. This reflects a five
percentage point increase from January 2016.

“It’s very encouraging to see more business owners holding a positive
view of the U.S. economy compared to last January, when more than half
believed the economy was going in the wrong direction,” said Union Bank
Managing Director Todd Hollander, Head of Business Banking. “Although we
see some potential challenges ahead, this confidence is essential if
further job growth and expansion is to occur.”

According to the Survey, the view from small business owners about the
state of the overall business climate is mixed. While 36 percent noted
an improvement over the past two years versus 35 percent in the previous
survey, one-third said it remained the same (vs. 29% in January 2016)
and 30 percent indicated that it had worsened (vs. 35%).

Further, sentiment was mixed when respondents were asked about the next
two years. Forty percent believe the overall climate for small
businesses will improve, while 35 percent expect it to worsen and 25
percent anticipate it will remain the same. This is a significant change
when you consider that in January 2016, 40 percent of respondents
expected the business climate to remain stable and 22 percent believed
it would worsen.

Staffing, Sales, and Capital Expenditures

While a vast majority of business owners (84%) plan to keep staffing
levels stable, hiring is slowly picking up pace. While only 12 percent
of small business owners said they expect to hire additional employees
in 2017 — a five percentage point increase from last year — the majority
(62%) plan to make permanent full-time hires (up 20 percentage points).
They also expressed greater interest in part-time employees (up 10
percentage points). Contractors and temporary positions appeared to be
less appealing than in previous years.

Nearly half of small business owners reported steady sales in 2016, a
double-digit increase from 2015. Forty-six percent plan to keep prices
the same. This is in line with the January 2016 results. At the end of
2016, 26 percent of those surveyed indicated they would raise prices
versus 29 percent earlier in the year.

Referrals from existing clients remain the most common, though
declining, means of generating new business (down 4 percentage points).
Fourteen percent of those surveyed are adding locations and/or
purchasing new or leased equipment. This is a four-point increase vs.
January 2016. However, in general, business owners are not looking to
increase capital expenditures. Sixty-seven percent indicated that they
plan to keep capital expenditures the same. This is in line with the
previous survey.

Impacts of Jobs Act, Affordable Care Act, Minimum Wage

While seven in 10 small business owners said the 2010 Small Business
Jobs Act has had no impact on their business, 18 percent indicated that
they did notice benefits, a five-point increase from earlier in the
year. Most notably, business owners are recognizing tax relief, up 31
percentage points from January 2016.

Fifty-two percent of business owners said their health care costs have
risen as a result of the health care changes. However, for most (80%),
the Affordable Care Act has not impacted employment. Seven percent of
business owners said the Act has actually increased employment, a
three-percentage point gain from January 2016 and closer to 2015 levels
(which were at five percent).

When asked about proposed changes to the minimum wage, nearly
one-quarter of business owners showed a high level of concern compared
to 51 percent who indicated that they were “not at all concerned.” Small
business owners in California voiced the greatest concern at 25 percent.

Federal Support for Small Businesses

Forty-five percent of small business owners rate the federal
government’s efforts to support small businesses as poor or very poor.
This reflects a three-point drop from the previous survey.

Thirty-six percent of respondents rate the efforts as fair. However,
nearly 40 percent of respondents said more government programs would
help stimulate business growth, followed by lower interest rates (33%)
and greater access to capital and credit (28%). One in four said reduced
regulation and legislation aimed at keeping jobs in the United States
would have the greatest impact.

More than two-thirds said the federal government’s support of minority
businesses was fair, good, or very good. This remains consistent with
the January 2016 findings.

Another similar finding to last year is equal pay, with a majority of
business owners reporting that these policies remain a low priority.
Slightly more than 50 percent said they have not made any conscious
efforts to address this issue.

Access to Credit, Spending

Most small business owners said access to credit has remained constant
over the past two years. The survey showed a slight drop in loan
applications although approvals were up two percentage points to 81
percent. The survey also found a significant uptick in bank and credit
union loans, with an increase of 9 percentage points from January 2016
(69% vs. 60%), while other financial sources remained static.

However, business owners are divided when asked if they are prepared for
changing interest rates. Fifty-one percent of business owners said they
are prepared, while 49 percent are either unsure or admit to being
unprepared. This is similar to the results in early 2016.

“The survey results indicate there is increased access to credit within
the banking industry, with more small business owners receiving loans or
credit to help finance day-to-day operations and growth,” said Kirsten
(Didi) Hakes, head of the SBA Lending group at Union Bank. “As the
interest rate environment continues to change, it will be important to
continue our dialogue with our clients to ensure they’re prepared for
any interest-rate hikes and hedging where appropriate.”

A slight majority (52%) of small business owners said they were working
the same number of hours at the end of 2016 as they did during the same
time last year (vs. 49%); 34 percent said they are working more; and 14
percent said they are working “somewhat or a lot less.” Increased
business continues to be the main reason respondents are working more
hours.

Planning the Future: Ownership Structure

The proportion of business owners planning changes to ownership
structure remains constant, marking a three-year trend. Eight in 10 said
their business will continue to operate in its current form. Among those
planning a change, selling the business or taking on a partner are the
top choices, followed by acquiring a new company.

The above survey is for informational purposes only. The findings are
based on surveys of small businesses, and the information is not a
guarantee of actual or future performance.

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About the Survey

Union Bank, working with its survey partner(MaritzCX), surveyed
693 respondents (591 in California and 102 in the Pacific Northwest)
online from Dec. 12, 2016 to Jan. 3, 2017. The small business
respondents were screened to ensure that they have been in operation for
a minimum of two years with owners over the age of 25. The small
businesses were defined for the survey as having $15 million or less in
annual sales. The margin of error for the full sample is +/-4 percentage
points. For the various regions, the margins of error are as follows:
Southern California +/-4%, Northern California +/-7%, and Pacific
Northwest +/-10%.

About MUFG Union Bank, N.A.

MUFG Union Bank, N.A., is a full-service bank with offices across the
United States. We provide a wide spectrum of corporate, commercial and
retail banking and wealth management solutions to meet the needs of
customers. We also offer an extensive portfolio of value-added solutions
for customers, including investment banking, personal and corporate
trust, global custody, transaction banking, capital markets, and other
services. With assets of $115.6 billion, as of December 31, 2016, MUFG
Union Bank has strong capital reserves, credit ratings and capital
ratios relative to peer banks. MUFG Union Bank is a proud member of the
Mitsubishi UFJ Financial Group (NYSE: MTU), one of the world’s largest
financial organizations with total assets of approximately ¥302.1
trillion (JPY) or $2.6 trillion (USD)¹, as of December 31, 2016. The
corporate headquarters (principal executive office) for MUFG Americas
Holdings Corporation, which is the financial holding company and MUFG
Union Bank, is in New York City. The main banking office of MUFG Union
Bank is in San Francisco, California.